Impact

What gold? Exchange in Singapore allows trading of diamonds

What gold? Exchange in Singapore allows trading of diamonds
A trader holds a four carat diamond worth about US$8,000 in the town of Koidu in eastern Sierra Leone. Reuters file photo
Published: 2:54 PM, October 10, 2017
Updated: 2:56 PM, October 10, 2017

SINGAPORE — When it comes to havens, investors usually think of gold or Treasuries. Now an exchange in Singapore is starting to trade a credit card-sized package of diamonds for those seeking a shelter from global risks.

While bullion trades in standard weights and purities, diamonds vary according to cut, clarity, colour and carat, making them generally harder to buy and sell as an investment.

To solve this, the Singapore Diamond Investment Exchange is listing a product called Diamond Bullion, or sets of investment-grade polished gems, in denominations of about US$100,000 (S$136,000) and US$200,000 each.

"Until now, there was no way people could invest in diamonds in the form which is equivalent to investing in gold," said Alain Vandenborre, executive chairman and founder of the exchange.

"A diamond has absolutely zero correlation with any other asset class, whether it's commodities, bonds, equities. It's a store of wealth, it's a hedge against volatility and you need that in your portfolio."

The products are issued by the Singapore Diamond Mint Co. The gems are sourced from the wholesale market through De Beers sightholders and Alrosa PJSC, and must be in the top five levels of colour and clarity, Mr Vandenborre said in an interview in Singapore on Oct 4.

The exchange plans to list other denominations in future, and the interest they attract could boost trading volumes and global prices, he said. The products are fungible and tradeable, with real-time pricing available from the exchange website or the mint's mobile app, the bourse said in a statement.

Still, diamonds are down more than 30 per cent from a 2011 high, data from PolishedPrices.com show, as the Chinese market softens and young consumers spend more on smartphones and gadgets. Gold's lost a similar amount from its peak that year as stock markets climbed and the global economy recovered.

The bourse, which says it's the world's only electronic exchange for trading investment-grade diamonds, has dealt about $165 million of the gemstones since starting in May last year. Temasek Holdings Pte is backing the exchange through its venture-capital unit Vertex Venture Holdings, which has a 20.75 per cent stake. BLOOMBERG